String of bankruptcies reported among California doctors

October 7, 1999
Web posted at: 12:05 p.m. EDT (1605 GMT)

REDWOOD CITY, California (CNN) -- As law-makers debate health care changes in Washington this week, the California Medical Association (CMA) has issued a warning: doctors in the golden state are in critical financial condition, with a string of bankcruptcies and widespread financial difficulties that threaten patient care.

According to the CMA, a physicians' lobbying group, in the past three years 113 doctors' groups have gone bankrupt. They warn that 90 percent of the nearly 350 remaining groups are in serious financial difficulty.

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Medical Correspondent Eileen O'Connor reports that several doctor groups in California have gone bankrupt Windows Media 28K 80K

The problem is the yearly per patient fee doctors' groups negotiated with insurance companies, according to the CMA. The idea was doctors could pool the money and decide where to put their resources. But many have found the money simply isn't enough.

Dr. Walter Koenig is a successful California neurosurgeon, yet the group of physicians he worked with went bankrupt last year, costing him $28,000.

Koenig says the money paid by the HMOs and the insurers on a per patient basis does not cover the cost of the care doctors are actually providing.

"Someone needs to look at whether the amounts of money allocated for health care are appropriate or whether patients basically are under insured," Koenig says.

A survey of doctors showed the rates paid from health plans to pediatricians averaged about $293 per patient per year. By comparison, pediatricians say the average cost of care required per child is $564 a year.

A lesson in managing money?

Insurance and HMO industry groups point out it was the physicians who wanted the lump sum per patient system.

"They're more used to a time when they did whatever they thought right and the insurance company paid the bill. Now to some extent they're responsible for the cost and some of them have not yet learned to manage it very well," said Walter Zelman of the California Association of Health Plans.

The HMOs and insurance companies say the low rates paid out are not due to companies taking a high percentage off the top, adding only 1 to 2 percent is profit margin.

Still, the average spent by each plan on actual health care was only 15 cents per dollar paid in premiums.

With 44 million Americans currently without insurance, few patients can afford to pay more for health care, and Koenig worries that few new new doctors will set up a practice where costs are high and pay is low.